In the clearest indication yet that the state's quarter share will be sold, the minister said the Cabinet would decide whether airport assets would be put on the market.

The minister confirmed the focus of a review on the sale of state assets in his department had been on aviation rather than the domestic transport sector.

"No formal decision is made yet," he said.

"What I can say is that Aer Lingus stake was held for strategic reasons and having studied the matter over the summer I don't think that really stands anymore."

Economist Colm McCarthy recommended disposal of the stake in his report into the possible sale of state assets in April. Mr Varadkar revealed several months ago a sell-off was being considered.

Ryanair owns 29.4pc of the company - just shy of the level which prompts an automatic takeover bid under company law. The budget carrier has already had two bold bids rejected.

One major concern over a takeover was that the Aer Lingus brand could lose its valuable landing slots in London's Heathrow Airport and the state would miss a key tourism and business link to the British capital.

Mr Varadkar told Newstalk radio: "We have a 25pc stake. You actually need 30pc to block any changes on slots - more and more people are using other connections other than Heathrow."

On the sell-off of airport assets, the minister said it would be decided by the Cabinet but any deal is complicated by debts in Dublin Airport Authority.

Mr Varadkar said a draft memo examining the option of the sale would be brought to Cabinet tomorrow.

Budget airline Ryanair, which twice failed in audacious takeover bids and now holds 29% of its rival, was quick to dismiss talk of a sell-off.

In a statement, Ryanair said the airline would not bid to take complete control of Aer Lingus if a sale went ahead.

"Ryanair would welcome another financially strong airline/investor acquiring the Government's 25% stake, which could then work with Ryanair and other like-minded shareholders to restore shareholder value, which has been destroyed over the past five years by the board and management of Aer Lingus," the company said.

Ryanair also said it would consider selling its stake in Aer Lingus if the bid went through.

It added: "Ryanair will not engage in, or comment upon, rumour or speculation, but remains willing to work with any other Aer Lingus shareholders to maximise shareholder value which has under the current board of Aer Lingus collapsed by more than 80%."

Aer Lingus was valued at more than three euro a share in early 2007, while at lunchtime today it was worth about 65 cent.